GameStop Corp. shares fell by more than 10% in after-hours trading, following the company’s report of a significant drop in second-quarter sales.
Despite the revenue decline, the video game retailer posted a surprising profit, which was not enough to ease investor concerns.
For the second quarter, GameStop reported sales of $798 million, down over 30% from the $1.164 billion recorded in the same period last year. This was well below analysts’ expectations of $896 million, according to FactSet. The company, however, managed to turn a profit of $14.8 million, or 4 cents per share, compared to a loss of $2.8 million, or 1 cent per share, a year ago. On an adjusted basis, GameStop earned 1 cent per share, outperforming expectations of a 9-cent loss.
GameStop’s cash and equivalents at the end of the quarter stood at $4.204 billion, up significantly from $1.195 billion a year earlier. This increase is largely attributed to a $2.14 billion stock sale in June, intended for potential mergers and acquisitions. However, the company did not provide a conference call or further details on its earnings report, leaving many investors uncertain about the retailer’s long-term strategy.
The company, which gained attention as a “meme stock” in early 2021, continues to face challenges in adapting to shifts in the gaming industry, particularly as physical game sales decline in favor of digital downloads. Analysts from Wedbush expressed concerns, noting that GameStop lacks a clear growth strategy to compete in new, expanding categories. Sales of hardware, software, and collectibles all saw declines compared to the previous year.
Despite its efforts to refocus on profitability under CEO Ryan Cohen, who has been vocal about avoiding stock-trading hype, the company’s ability to navigate the evolving gaming landscape remains in question. Investors remain cautious, as the stock has been prone to volatility, largely driven by its meme-stock status and movements within the retail trading community.
GameStop shares have risen 33.8% year-to-date, but the latest sales decline underscores ongoing concerns about the company’s future prospects. The stock closed at $23.45 before slipping further in extended trading following the earnings report.
With input from Market Watch, Forbes, and Fortune.
